Shanghai Scrap

Shanghai Scrap is withholding comment on Barack Obama’s economic stimulus in favor of compelling anecdotal evidence that – while the US Congress debates how to stimulate anything – the Chinese government is stimulating the US scrap industry.

Here’s the deal:

Late last year, with little notice, China’s State Reserve Bureau announced that – in an effort to stimulate its flagging non-ferrous metals sector - it would fund the acquisition of a large non-ferrous metal stockpile. Soon after, Yunnan Province – home to a thriving non-ferrous industry – announced its own strategic reserve to include 300,000 tons of aluminum, 100,000 tons of tin, 300,000 tons of zinc, 150,000 tons of lead, and 150,000 tons of copper (details on both programs, here).

Keep in mind that, in the wake of the economic crisis, and the collapse in China’s export manufacturing sector, the non-ferrous metals industry nearly collapsed due to a lack of demand and excess inventories purchased at record prices. As a result, raw material suppliers – including US scrap metal dealers and Australian miners – found that, in the space of two months, their biggest and best customer (China) simply disappeared.

Cut to this afternoon, and lunch with four mid-sized US scrap metal exporters (and one physician). I arrived expecting to hear market doom and gloom (despite a modest recovery in the markets), as well as harsh words for the large number of Chinese scrap buyers who had reneged on contracts during the October market collapse.

How wrong I was. (more…)

Compared to the last bird flu scare, China seems to be taking the current, unsettling spate of bird flu fatalities with unlikely aplomb. Consider: in January, there were five Chinese deaths from the feared pathogen; for the whole of 2008, there were only three. Perhaps the relative ambivalence is related to the fact that the pathogen is emerging during Spring Festival, when attentions are elsewhere.

But if China is taking the emergence in stride, others may not be. On Wednesday I spent two hours at Tokyo Narita Airport, a major air hub and transfer point for flights throughout Asia. And, while there, I saw something that I hadn’t seen since the 2003 SARS outbreak: passengers, and air industry employees, wearing surgical masks in hope of warding off airborne pathogens. A couple of notable cases: a Northwest Airlines boarding agent was wearing a mask while scanning the tickets of boarding passengers (what a way to greet them); on my flights in and out of Narita, a handful of passengers were wearing masks.

To be fair, I have absolutely no idea if the masks were related to bird flu, specifically, or were just a protective measure (and not a particularly effective one) to protect against winter colds. Also, the number of people wearing masks on Wednesday – maybe one in fifty – doesn’t come close to the numbers in 2003, when half had them. But I’ve been flying in and out of Narita a few times per year, for years, and I can’t recall another instance of mask wearing since SARS.

[Professional Note: In November 2002, two months before the international media found the SARS story, I visited Guangzhou for the first time, and was struck by the large number of people walking around the city in surgical masks. When I asked the person I was visiting, a source, for the reason, he told me that "Guangzhou has a particularly bad flu this year." I had no reason to think otherwise, and let it go. But ever since, I've been sensitive to mass mask wearing.]

[UPDATE: A friend writes to point out that "[S]urgical masks are just as effective as magic amulaets at stopping viral particles. That’s why Northwest should prohibit its employees from wearing both and scaring the passengers.” An excellent point. And since we’re on the topic of Northwest Airlines, I should probably mention that Wednesday’s edition of Flight 1451 was delayed for just over two hours because the airline couldn’t find a flight crew to pilot it. That, according to the flight attendants who kept the stranded passengers informed during the delay.]

I was feeling kind of bad about the lack of updates to Shanghai Scrap during the Chinese New Year period – until I stopped by the Shanghai Daily website and found that the Metro section hadn’t been updated in five days.

Other sections of the paper – business, world, and national news, for example – have remained current. But, presumably, that’s because those sections are generated by Xinhua in Beijing. So, at a minimum, we must conclude that Shanghai Daily’s entire English-language staff deserted the office for the Chinese New Year. Good for them. Still, can anyone out there think of another city newspaper, anywhere else on the planet, that would totally suspend local news for a several day holiday? I can’t.

TOTALLY UNRELATED, but I’m going to bring it up, anyway. This morning I had my first listen to Bruce Springsteen’s middling new recording (here, at the ‘Scrap, we are otherwise big admirers of the Boss), and no more than twenty seconds into the first track, Outlaw Pete, I said: “Holy smokes, the Boss just ripped off Kiss!” A quick google search revealed that I’m not the only one who thinks so. For further info on this emerging story, and a good laugh, see here.

ALSO UNRELATED, but a nifty piece of reported blogging … Dan at China Law Blog gets the scoop on Obama’s phone call to Hu Jintao in the wake of Tim Geithner’s (dumb) currency manipulation comments.

UNRELATED, BUT EXCELLENT is Rebecca MacKinnon’s outstanding open letter to President Obama in re to US-China relations. It includes this very, very good suggestion:

The U.S. embassy in Beijing should build a Chinese-language website modeled after change.gov, focused not just on U.S.-China relations, but on the range of concerns and interests – from environment, to food safety, to factory safety standards, to education and real estate law — shared by ordinary Chinese and Americans. Some linguistically talented State Department employees should start blogging in Chinese. Open up the comments sections, see how the Chinese blogosphere responds, then respond to them in turn. Translate some of the Chinese conversation into English for Americans to read and react, then translate it back.

I’ll admit: my knowledge of Chinese astrology hasn’t advanced much beyond what I learned from Chinese restaurant placemats in Minnesota. This means that, like many of my ilk, I’ve been under the blissful impression that the Year of the Ox might beckon a bull market, or at least an expansion in the number of human beings who can afford a good T-bone. Alas, I was wrong: in the last 12 hours I’ve had two conversations with people knowledgeable about these astrological matters, both of whom informed me that the Ox brings economic struggle (“If you dream of an ox, it’s trouble,” said one. “Because an ox must work very hard. So it’s better to dream of pigs. Pigs get to be lazy.”).

Me, I haven’t been dreaming of pigs or oxen. I’ve been dreaming of fireworks and, specifically, the ones that have been going off outside my window since Monday afternoon (not complaining). In fact, they’ve been going off with as much – if not more – frequency than what I recall from past Chinese New Year celebrations. So, with a spirit of new year optimism, I ventured down to my street and queried two of the local fireworks vendors (both, seasonal) to get a sense of how the 2009 market in celebration explosives is performing.

The results were compelling! First, both vendors were quick to point out that last year’s sales were unusually poor due to the unprecedented New Year snowstorms. A more proper point of comparison, I was told, was 2007. Now, neither of these fellas are the kinds of guys who keep detailed sales ledgers, but they were both adamant that the volume of fireworks sold this year was comparable to 2007. Meanwhile, wholesale prices are down and street prices are steady, or up 5% – 10%. Both vendors claimed that there was very little resistance to a RMB 2 (US$.29) or RMB 3 (US$.43) increase on what would ordinarily be a RMB 25 (US$3.66) string of several hundred firecrackers. Those tend to be bought by families. But the large boxed rocket tubes (or whatever the heck those large red boxes are in the photo), already quite expensive (in excess of RMB 200, or US$29.00), are holding steady, price-wise – especially because restaurants and hotels are the primary consumers of that kind of fire-power. And they’re being careful.

An important caveat for anyone (like me, briefly) too ready to draw sweeping economic conclusions from this limited market survey. According to one vendor, the strong market in Ox year fireworks is proof that the economy is actually performing poorly: “People want to scare away the bad luck and the rat year.” I’m sure there’s an economics Nobel in there somewhere.

[UPDATE 1/19: China Economic Review also writes on the Fireworks Index (h/t WSJ's China Journal) and comes to entirely different conclusions. Meanwhile, Xinhua reports that fireworks sales were up this year, in Beijing.]

Best wishes to my readers on this, the eve before the Year of the Ox. Good fortune, recovering base metal prices, and happiness to All.

A personal note: I’ve spent more than six years in China, and I’ve taken well over 20,000 photos in that time. So one would think that, after so many years and shutter clicks, I would have managed to take at least one photo of an iconic Chinese ox pulling a plow, with which to decorate this post. And, after more than an hour of searching, I just happened across this mis-filed image, taken in 2004, in a Yi minority village located in the hills above Xichang, in Sichuan.

Posting will be light to non-existent until mid-week … though I might be tempted to update this post with some photos of the epic New Year meal to which I’ve been invited, and – if necessary – commentary on the fireworks (especially if they take out one of my windows – again).

Finally, it wouldn’t be fair to talk about the Year of the Ox, without giving brief mention to The Ox, at his best, here.

[UPDATE] In the course of this blog’s two year history, I’ve long intended to photograph and post all of the dishes served at a Chinese banquet (for the benefit of the 95% of my readers outside of China). For various reasons, I never have … before this afternoon. As a result of the generous hospitality of a good friend, I was invited to a (Sichuan-style) company banquet to mark the Chinese New Year. After the jump, a course by course photo essay on each of the dishes served. Believe me, this was a good one … (more…)

Just looked out the window and saw the bluest Shanghai sky that I’ve witnessed since … the Olympics?

Of course, the blue sky Olympics were achieved through a series of stringent regulations that choked off economic activity and – by extension – air pollution. In contrast, this evening’s lovely winter dusk is attributable to the oncoming Spring Festival and the near total cessation of economic activity (and pollution) while China’s migratory labor force enjoys a few weeks at home. At least, that’s how it worked in years past. This year, with the economic crisis already having a crippling impact on China’s export sector, one can’t help but wonder if these blue skies will persist into the spring, and later. It’s a bittersweet trade-off, really: the economic health of China’s migrants, versus the blue skies that they’ll tell you that they used to enjoy back home, before China’s economy achieved its miracle.

For more blue sky photos of Shanghai, and elsewhere in China, take a look at the marvelous set of images taken by flickr user kattebeeletje’s mother in 1984 and 1985 (h/t Shanghaiist).

Further thoughts on blue oxen can be found here.

Back in November, Shanghai received the very sad news that the elegant Face Bar was closing after ten years operating within the grassy Ruijin Hotel compound. Regardless of whether or not you were a denizen of Shanghai’s nightlife, if you were in an expat in Shanghai, more likely than not you visited Face Bar at some point – and most likely, the purpose of your visit was to show off the extraordinary renovation of the building, and its idyllic garden setting, to out-of-town guests. I can’t count the number of times that friends with no interest in Shanghai’s nightlife listed Face as one of their tour stops.

Yesterday morning, a little after dawn, I was in the neighborhood and slipped past construction fences to snap this photo of what remains of a building that many will remember as an idyllic pink glow set in a vast green lawn (you can see it from Fuxing Road, as well, but the view is partially blocked by a wall).

The building is empty and gutted, but – to my untrained eye (it still has its glass windows) – it appears to be awaiting another renovation, and not demolition (rumors has it that Face will be re-opened, eventually). Still, it’s now surrounded by construction, and it’s hard to believe that it will remain unscathed by the activity around it. And that’s a pity, because Face – and the Shanghai-owned Ruijin Hotel complex that owned the building – was a one-of-a-kind property that can’t be rebuilt later. Likewise, the open spaces that made the complex so special can’t be reclaimed once a building has been erected upon them. (more…)

It’s the question that my Chinese friends have been asking for months. So, for their sake, I’m quite pleased to announce that – as of yesterday – those seeking insights into how the new Obama administration views China, now need look no further than the totally revamped White House website. Under the “Agenda” tab, click “Foreign Policy,” and then scroll down, past passages on Afghanistan and Pakistan, Nuclear Weapons, Energy Security, to the sixth and last bullet point under “Renewing American Diplomacy,” where you’ll find what – I believe to be – the administration’s first official statement related to China:

Seek New Partnerships in Asia: Obama and Biden will forge a more effective framework in Asia that goes beyond bilateral agreements, occasional summits, and ad hoc arrangements, such as the six-party talks on North Korea. They will maintain strong ties with allies like Japan, South Korea and Australia; work to build an infrastructure with countries in East Asia that can promote stability and prosperity; and work to ensure that China plays by international rules.

Pretty sure that won’t play real well over here. Consider: the first sentence is a total repudiation of the bilateral agreements, occasional summits and ad hoc arrangements with which the Chinese government has become comfortable over the last eight years; first clause, second sentence, excludes China from the list of countries with which the US maintains “strong ties” and alliances; the second clause, second sentence, doesn’t bother to mention which countries are capable of promoting stability and prosperity, despite the fact that the CCP has basically staked its foreign policy reputation on being able to achieve just that; and the final clause, second sentence (which happens to be the only clause in the entire “Agenda” section that mentions China), suggests that China needs policing by the US.

All in all, a prickly start, I think.

I’ll have more to say about this topic in coming weeks (including, whether or not this the proper approach for the US to take). For now, I’m willing to wager that within six months China will be much more than a clause to the nascent Obama administration. Also, this post shall serve as the – ahem – inaugural entry in the new “US China Policy” category.

[UPDATED 1/23: As I was just saying a mere 24 hours ago ...

WASHINGTON — Timothy F. Geithner, who took a big step toward confirmation as Treasury secretary on Thursday, told senators that the Obama administration believes China is “manipulating” its currency, suggesting a more confrontational trade stance toward that country than under the Bush administration.

That, from today's New York Times.]

[FINAL UPDATE AND RECOMMENDATION: Jim Fallows just blogged an absolutely essential deconstruction of Geithner's "manipulation" answer. An excerpt:

Do we think that the Chinese authorities who have put some $2 trillion into US assets will respond blandly to being labeled manipulators -- or to a policy that would effectively devalue the investments they've already made here? If Americans think that, they're naive -- in my view, based on this interview with a man at the center of Chinese decision making ... [T]o boil it down to the bald assertion that “China is manipulating its currency” ignores, vulgarizes, and misconstrues a lot more than it clarifies.

Well worth reading the full post.]

The Obama inauguration took place at 1 AM, China time, but circumstances conspired to place me in a location where I could not watch the ceremonies live (via cable, satellite, or stream). On the bright side, that unforeseen circumstance allows your correspondent to report that the inauguration was not broadcast live on Chinese television (at least, not in Shanghai). However, frantic channel surfing did reveal that the CCTV news channel broadcast a small portion of it [see below: I got this wrong], with translation, and then shifted to a biographical commentary on the president. It ran for ten minutes (after I landed on it), and looked like this:

Theoretically CCTV has as much reason to run Obama’s inaugural address as MSNBC has to run Hu Jintao’s remarks to his next party congress (at 1 AM). And, despite what appears to be palpable popularity for America’s new president in China, I seriously doubt that ratings would have been so hot (again, at 1 AM).

Except that, at precisely the moment Obama was delivering his speech, CCTV was broadcasting Sunday’s NFC Championship game between the Arizona Cardinals and the Philadelphia Eagles (see below). Which makes me wonder: if Obama’s inaugural went head-to-head against the Cards and Eagles at 1 AM in China, which event would draw more viewers? My money’s on Obama. [update: in a comment below, Theo correctly points out that the NFC Championship Game would draw a bigger audience among American expats.]

Further thoughts on the strange travails facing NFL fans in China, here.

[UPDATED: Looks like I was a little late to the show. According to Joel at danwei, Obama's address was televised right up to the moment that he spoke this phrase: "earlier generations faced down fascism and communism." Joel links to Hoiking, and a short clip that shows the CCTV broadcasters breaking into the speech, and beginning the broadcast that I photographed above. In my defense, I found the interrupted broadcast after searching through 70 channels of Shanghai and Hong Kong cable. But that's what I get for posting at 3:00 AM!]

[SECOND UPDATE: A couple of people have emailed to ask, in effect: "How could you be so stupid as to miss the fact that the speech was being censored?" All I can say is that it wasn't obvious - to me - as it was happening. Basically, I came to the broadcast only seconds before it was cut, so it looked to me as if CCTV was just providing a brief excerpt.]

Over the last week I’ve noticed that Shanghai’s army of (some say) 100,000 scrap peddlers have been unusually busy. The piles of cardboard on the streets, and on the backs of bicycles are noticeably larger; the bags full of cans and bottles are stuffed noticeably tighter. Past experience has taught me that this is a seasonal phenomenon: scrap peddlers, like most Chinese, are interested in accumulating as much cash as possible before the Chinese New Year (starts Sunday). And they are aided in this effort by small businesses that have spent the last year accumulating scrap inventories (say, piles of water bottles in the proverbial “back room”) with the intention of liquidating them for additional cash on the verge of the New Year.

What makes this year different is the global collapse in scrap recyclable prices over the last three months. Margins for scrap peddlers, and major scrap recycling companies, have shrunk, and the price of many recyclables is now not far from the rock bottom price of production (ie, the cost of producing the materials). And, among the world’s recyclers, few have been hurt worse by this decline than Chinese recycling companies. So it came as no small surprise to me when – in the course of a long walk through the French Concession this afternoon – I spoke to three scrap separate scrap peddlers who told me that buying prices for plastic and paper scrap have rebounded by as much as 20% over the last week!

This bounce bears absolutely no resemblance to what’s happening in the global markets for these materials, and I’m at a loss to explain it. Shouldn’t prices be declining? Maybe there’s a premium on scrap from the French Concession?

[File under ... Department of Just When You Think You've Heard Everything]

During the course of my still young years, I’ve spent enough time embroiled in the US and Chinese medical systems to know that nobody’s perfect, and some systems are even less so. Still, not all things are equal, and once in a while something happens to remind me of why – if given the choice – I’d still rather receive medical care in the US than in China (despite the lower costs here).

And that brings me to this little story.

This past week a friend in Shanghai learned that he had a serious medical condition requiring as-soon-as-possible surgery. The timing couldn’t have been much worse: the Chinese New Year starts next Sunday night, and most of China – and its health care industry – will shut down for two weeks. Anything beyond emergency medical treatment (ie, something involving an ambulance) will be nearly impossible to obtain. The practical result is that Chinese hospitals – and surgical wards, in particular – are booked solid with patients in need of care before the holiday sends the doctors jetting to warmer climes.

My friend is luckier than most. Despite receiving a diagnosis on the verge of Chinese New Year, he was able to secure a surgical appointment for Monday (today, this morning, barely a week after the diagnosis). There was just one problem: he was told that he’d need to check into the hospital as soon as a bed became available … and that happened to be Wednesday, fully five days before the scheduled surgery. The hospital (an awfully good one by local standards) told him that if he declined the Wednesday bed and the Monday appointment, the “opportunity” would be passed onto the next cust – er, patient – in line and he’d have to wait until after the Chinese New Year. At the earliest. (more…)

This evening (Shanghai time) I appeared on Today with Pat Kenny, broadcast by RTÉ 1 in Dublin (I’ll post a link to the podcast as soon as it’s available), to discuss the collapse of the international scrap recycling markets over the last three months, and the negative effect that the collapse has had on municipal recycling programs (in Ireland). To my surprise, this topic is becoming rather popular in national and local media, worldwide, with much of the coverage focused on China’s role in the collapse (unfairly so, as I’ll get to).

Following my one-on-one interview with Kenny, which focused exclusively on China, Kenny led a round-table with several individuals familiar with the Irish recycling trade, including a member of Ireland’s Green Party. It was an excellent discussion (again, I’ll post a link once the podcast is available). But, inadvertently, the most illuminating moment came when Kenny asked the Green Party member to offer suggestions on what Ireland should do with its recyclables now that there aren’t any export markets left to which it can be sent. Over the course of nearly five minutes, the Green Party member hemmed and hawed, with Kenney becoming increasingly impatient and agitated, until she finally offered three suggestions: land filling, fuel for cement factories, and “research” on alternatives. To state the obvious: the first eliminates the need to sort recyclables in the first place, the second involves fueling one of the world’s most polluting industries, and the third isn’t really a suggestion.

Now, I don’t doubt that good intentions of the Green Party, just as I don’t doubt the good intentions of the environmentalists who spent the last decade encouraging and building recycling efforts throughout the developed world. But, with good will to both groups, I humbly suggest that the recycling industry, the business that does the actual recycling, doesn’t look at a curbside bin of newspaper as a sign of personal, green, and/or civic virtue. It looks at it as a cheap alternative to trees for making new paper products. Period. If the green movement hopes to have a credible role in finding alternatives to China and other foreign importers as a “solution” to the developed world’s recycling, it’s going to need to start thinking more like that – that is, more like scrap men – and less like residents of Walden Pond. (more…)

[UPDATE: As it happens, RTÉ put me on the air 30 minutes before originally announced (with 10 minutes notice!), so apologies to anyone planning to listen at the originally scheduled time. The 10 minute interview (of me) will be posted to the show's website later today, and I'll post a link when it's available. The subsequent 20 minute discussion among the other guests was excellent, and well worth hearing.]

Briefly: I’ll be a guest on RTÉ Radio 1′s Today with Pat Kenny, broadcast from Dublin, on Thursday, January 15, during the 11 AM hour, Dublin time (7:00 PM in Shanghai, and 5:00 AM in Minnesota). We’re going to discuss the collapse of the Chinese scrap recycling markets, and the impact that the collapse has had on Ireland and other scrap exporting nations. We’ll also be joined by a couple of Irish guests with expertise regarding the specific situation there. The program can be streamed here, and it looks as if it will be archived and downloadable via itunes.

In other news. A particularly virulent flu has waylaid the entire Shanghai Scrap staff (me) for the better part of five days, resulting in an unanticipated posting hiatus. Fear not, though … recovery efforts are finally underway. We plan to look out the window, again, tomorrow.

Here’s a question for the cost-benefit analysts among you: if the annual flu vaccine contains three inactivated virus types, and I’ve already been through my second round of the flu in the last two months, is there any sense in getting a flu shot, now? Feel free to share thoughts and suggestions.

A couple of quick hits before I shuttle back to the other room.

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On Saturday I visited one of Shanghai’s most respected medical institutions in hope of receiving confirmation of my self-diagnosis, and some medication to relieve the symptoms. Instead, the doctors insisted that I needed a CAT scan. In retrospect, the CAT scan would have been nearly as helpful as what was prescribed to me (that is, not at all), and I probably should have stayed at home to begin with. Still, all credit to this Shanghai medical institution: their prices are far lower than what I would pay for similar services in the US (including the refused CAT scan), and I suppose they need to make up those margins from someone. Why not me?

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Matthew Welch has written Bailing Out One of the Twentieth Century’s Best Industries (h/t Andrew Sullivan), a concise and devastating critique of those who believe that the decline of the traditional newspaper is a) the fault of readers who don’t want to pay for news, and b) a tragedy for democracy. A favored passage:

At the risk of alienating what few old newspaper pals of mine still have jobs, the industry they (and I!) so cherish, which has suffered mind-blowing valuation losses and several dozen rounds of downsizing both in personnel and column inches, is still bloated after all these years, with costs that no publisher would dream of incurring if he was starting a newspaper from scratch in 2009.

Additional thoughts regarding bloated newspaper costs can be found here. But first read Welch’s piece here.